Probe into 1MDB financial misconduct now, says anti-graft group
Parliament's Public Accounts Committee (PAC) must begin an immediate inquiry into the troubled sovereign fund 1Malaysia Development Bhd (1MDB), an anti-corruption watch group said today.
The Centre to Combat Corruption and Cronyism (C4) said today the PAC should call "all actors involved" for the inquiry into the fund's massive debts, dubious land deals and secrecy over its transactions as 1MDB was a burden to the country's national debt.
It said Prime Minister Datuk Seri Najib Razak, who is chairman of 1MDB's advisory board, should provide an answer to the fund's troubled developments.
"1MDB can no longer afford the luxury of silence and must come clean on its actual state of financial affairs and management in general. 1MDB cannot operate in secrecy, and cannot pretend that it does not owe the Malaysian public, investors and business community any explanation or clarification," C4 executive director Cynthia Gabriel said in a statement.
The anti-graft group said the chairman of 1MDB's board of governors, Tan Sri Lodin Wok Kamaruddin, should present a status report of the fund's latest state of affairs to Parliament at its next session this month.
C4 noted that Lodin had also been involved in the purchase of Scorpene submarines as a director of the company, Perimekar, until 2010, and that the company was being investigated by the French authorities for allegedly accepting kickbacks in the submarine deal.
C4 said 1MDB should disclose updated information on the amount of funds placed overseas that have been repatriated back to Malaysia for reinvestments, to pay up debts as well as for reserves and upcoming projects.
The sovereign fund should also disclose the expected yearly rate of return on placements domestically and overseas, finance costs per annum, and the amount of 1MDB's loans and bonds that enjoy government guarantees.
"Malaysians have every right to demand accountability, transparency and integrity in the management and operations of 1MDB and the use of its funds… how could things go so wrong after just five years?"
1MDB was set up in 2009 as the government's strategic investment arm with a grant of RM5 billion but has since acquired debts of RM38 billion as of March 2013 amid allegations of mismanagement.
C4 said there were at least four areas to which 1MDB must provide answers.
One was its delay in getting listing approval for its energy unit comprising of power plants and desalination plants in more than six countries to settle a loan of RM5.5 billion that is due in November this year. The listing was aimed at raising more than US$3 billion (RM9.6 billion) to settle the loan which has been extended twice.
C4 said the planned listing has been deferred to later this year or early 2015, based on news reports, and questioned 1MDB's secrecy and silence over the delays in listing of its power assets.
The second issue was weakening investor confidence in the fund because of its slow progress and lack of good governance, as evidenced by the withdrawal of multi-billion deals in two of 1MDB's projects.
C4 cited the recent announcements made by the Qatar Investment Authority, Aabar Investments PJS (Abu Dhabi), Prudential (UK) and an Islamic bank in Kuwait that they were reviewing their positions in the Tun Razak Exchange (TRX) and Bandar Malaysia projects.
Both projects are behind schedule. TRX, a planned international financial district, was to have started construction in 2012, while Bandar Malaysia, an urban redevelopment township, is said to be one year behind schedule. Earthworks for TRX have not even begun, C4 said.
The anti-graft watchdog also highlighted 1MDB's land deals in Penang, where it bought more than 94.7ha of freehold land in Air Itam in three separate deals costing RM1.38 billion, at an inflated rate of 95%.
The first two transactions were done about a week before the 13th general election in May 2013 and announced as a plan to build nearly 1,000 low-cost and affordable homes.
C4 said the hasty deal was "reportedly devised by a group of businessmen close to Barisan Nasional" as an election "goodie" ahead of the national elections.
The land is now saddled with encumbrances, such as relocation issues of some 3,000 families who have lived there for generations.
It also estimated that the finance costs and interest payments for the land deal would burden 1MDB by about RM55 million a year.
And 1MDB's RM18 billion in the Cayman Islands must also be explained, C4 added.
It questioned why money raised from 1MDB's debt issuance had to be transferred to an offshore bank account in a Caribbean tax haven, as this allowed 1MDB to circumvent transparency and accountability.
C4 said the four cases were "just some of the misconduct of 1MDB".
"1MDB is in a sorry state – inflicting further burden to the fast-growing national debt –perhaps an accurate depiction of our country's economic malaise. Malaysians can no longer afford our nation to haemorrhage any further." – October 1, 2014.
